Conservation Council of WA Executive Director, Piers Verstegen, reacts to the announcement by BHP and Woodside that will see BHP's petroleum business to the Perth-based company.
The sale of BHP’s oil and gas assets has the potential to be a truly historic moment as one of the world’s biggest mining companies divests from fossil fuels, but exactly how this happens will make a huge difference to the climate and to the future reputation of BHP.
BHP has built its petroleum division over decades. If the company tries to wash their hands of these assets without taking responsibility for the damage they will cause in the future, then BHP’s green legacy moment could instead add a turbocharger to more fossil fuel expansion, leaving an oil stain on the company’s new green collar long after the assets have been sold.
It is well known that BHP’s petroleum assets come with a guarantee of ongoing carbon pollution for decades, not to mention the huge rehabilitation liabilities associated with the decommissioning.
What is more concerning is that the acquisition of these assets by Woodside Petroleum would be the catalyst to enable one of Australia’s most polluting new fossil fuel developments, the Scarborough LNG project. In carbon terms, Scarborough will produce an estimated 1.6 billion tonnes of pollution over its 50-year lifetime, equal to 15 coal fired power stations.
BHP’s oil and gas assets are extensive, with some valuations over $20 billion. If the petroleum division were an independent oil and gas company, it would be the largest in Australia. What happens with those assets in the future will be globally significant for the climate.
A shareholder resolution tabled by activist group 350.org has urged the company not to sell the assets. Instead, the company is urged to take responsibility for managing down the assets over time in a way cuts pollution, rather than simply handballing them to Woodside where they will inevitably cause even more damage to the climate.
Judging by the share price, the market has responded well to BHP’s news. The move will position the company as more attractive to investors wary of carbon risk and help BHP attract and retain increasingly discerning customers for the company’s iron, nickel, and other products. The recent announcement of a lucrative deal for the supply of nickel to Tesla shows the direction the market, and BHP are heading.
On the other hand, Woodside’s share price has been in steady decline, as the company is engaged in a desperate bid develop it’s Scarborough LNG project which is partly owned by BHP. Woodside has struggled to raise capital to fund the $16 billion project, while environment groups have launched a legal challenge against its environmental approvals and concerns are raised about impacts on Aboriginal heritage.
Aside from Scarborough, the cupboard at Woodside is looking bare. Woodside has failed to develop any meaningful growth strategy that would reduce its carbon liability and instead it is engaged in an all-or-nothing bid to develop Scarborough. While in the long run, the acquisition of BHP’s petroleum assets brings big liabilities, doubling down on petroleum could look like an attractive proposition for a company in Woodside’s position.
The short term cashflow from BHP’s oil assets would enable Woodside to finance Scarborough internally, as it struggles to find external investors willing to back the development. The sale would would also remove the need for Woodside to negotiate with BHP as a less-than-enthusiastic joint-venture partner in the Scarborough project.
From a climate perspective, Scarborough is a shocker. Direct pollution from Woodside’s Pluto LNG facility would more than double and would not return to current levels until sometime in the 2040’s, where Woodside says it will rely on offsets to reach net zero by 2050. The price that Woodside will have to pay for these offsets is anyone’s guess. Unlike many of its competitors, Woodside has no plan at all to deal with the indirect (or scope 3) carbon liabilities from any of its portfolio. This is a concern which led to a protest vote from Woodside’s largest shareholder, Blackrock at the company’s most recent AGM.
Other than as a catalyst for Scarborough, the BHP acquisition makes little sense for Woodside, but there are few other companies in the market for an albatross and this could make Woodside into BHP’s ‘useful idiot’.
The legacy of BHP’s petroleum assets must not be to accelerate damage to the climate. As a company, BHP has built these assets and it must now take responsibility for managing them down in a way that rapidly cuts pollution, not allow them to be bolted on to Woodside as a turbocharger for yet more fossil fuel expansion.
MEDIA INFORMATION: The Conservation Council of WA (CCWA) is the state’s foremost non-profit, non-government conservation organisation representing more than 100 environmental organisations across Western Australia.
CONTACT: For any enquiries relating to this release, please contact Robert Davies on 08 9420 7291 or by email, [email protected]